If a basketball coach stocks his bench with 7-footers, he’s not giving his team an advantage. He’s leveling the playing field, or the playing court, in this case. Business has never been a game for the timid and it’s only getting tougher. Everyone’s getting more competitive; markets are becoming commoditized; the players are bigger, stronger, faster. Leaders need every advantage they can get.
Establishing an advisory board doesn’t give leaders a leg up; it gives them competitive parity. In this climate, not having an advisory board puts you at a disadvantage. It’s like having a five-foot tall center on the opening tip.
Why Do CEOs Need Advisory Boards?
Advisory boards exist to drive growth. That’s it; there’s no other reason for a CEO to recruit a board than to have a team of people who help him or her grow the company. The bottom line is that the CEO needs to be smart enough to realize she doesn’t know everything; boards fill the holes in her experience and expertise. They supplement her linear thinking with creative juices, or they rein in blue sky ideas with practical advice.
In one of the best, most comprehensive, books on the subject today, Built to Scale: How Top Companies Create Breakthrough Growth through Exceptional Advisory Boards,* by Marissa Levin, she writes:
“While most entrepreneurs dream of building a sustainable and profitable company, they often lack the knowledge and skills required to move their vision and dream to reality. We need people who know how to build infrastructure and can teach us about leadership, who will open doors for us and make important connections and drive our sales - people who have already overcome the challenges we will eventually face at different levels of growth.”
With these people on the CEO’s side, she can make better decisions – decisions that are carefully considered, vetted, and made outside of the vacuum of her own ideas and opinions.
The Mechanics of an Advisory Board
As Marissa Levin points out in her book, there is no single “right” way to shape or utilize an advisory board. Some people have 12 board members with whom they meet formally; other leaders opt for 2 or 3 trusted mentors with whom they meet for lunch. When composing a board, leaders should think about:
Balance: Often, leaders see advisory board members in two camps: mentors and rainmakers. A board of mentors advises CEOs, challenge their ideas, and vet their decisions. Rainmakers, on the other hand, offer the benefit of their connections: they are there to help drum up business, make introductions, and bring in prospective customers.
One is not better than the other, but if a leader stocks her team with rainmakers exclusively, she won’t get the advice she needs to run the business, to take advantage of all the rain. On the other hand, a group of mentors is not bringing in new business or fully utilizing their connections and contacts. A balance, a mix of each type of board member, helps the CEO generate both new business and the wherewithal to handle it.
Number of members and meetings: Again, there is no right answer, but a board of 5-7 members tends to offer an optimal variety of diversity, experiences, expertise, and talent without becoming unmanageable. Again, CEOs should look for a mix – not only of mentors and rainmakers – but of thinkers, doers, dreamers, financial specialists, legal advisors, marketing and sales experts. Whatever gaps they have in their leadership should be filled by these members.
Meetings can be quarterly, monthly, or as needed by the leader. In some situations, the CEO may require advice from a particular board member. Maybe she’s running into difficulty with sluggish sales. She can reach out to her sales expert and meet individually, rather than waiting for a full board meeting. This allows for “just-in-time” delivery of guidance and support.
Compensation: Typically, board members are compensated for their time. How it’s done, though, can be flexible. They may be paid a retainer, fee per meeting, or a stipend for their service. In many cases, the CEO also includes stock options. This has a two-fold purpose: one, to compensate the members, and two, to tie them to the success of the company and give them a stake in the game.
Business is tough and only getting tougher. A few years ago, an advisory board may have been a competitive advantage. Today, it’s a must. As Marissa Levin writes, “Success is about surrounding ourselves with the people that can bring us to our highest potential.” The competition probably already has. It’s time to level the playing field.